Processing

Weekly kill: Is the tide turning on slaughter cattle pricing?

Jon Condon, 04/06/2013

 

Is the favourable movement in currency value starting to impact on processor livestock pricing thinking?

For the first time since February, one large export processor has this week lifted direct consignment rates on slaughter cattle for Southeast Queensland delivery by 5c/kg across all descriptions.

That does not amount to much – on a 350kg dressed weight grassfed bullock it’s just $17.50 – but the adjustment may have far more significance as a psychological benefit, rather than a fiscal one.

Readers should note, however, that two other large multi-state processors contacted by Beef Central yesterday are yet to adjust their current SEQ grids from their current low-points, where they have sat for the past four weeks or more under the weight of heavy supply.

Beef Central would not be so bold as to call it the bottom of the cycle, but some processor livestock managers are now suggesting the thickest part of the turnoff is now behind us.

Given that last week saw Eastern Australia notch-up yet another all-time record beef kill of 158,125 head, supply does not appear to be a contributor to any early signs of upwards adjustment in grid pricing.

The A$ is probably the biggest driver, descending into the US95’s earlier this week before opening at US97.3c this morning.

Other processors noted, however, that during heavy cattle and beef supply periods like this, importers simply look at the currency movement, and adjust their beef purchase bid downwards, accordingly, to compensate. While that strategy might work for a time, as soon as cattle numbers start to decline, that leverage starts to disappear.

“The dollar’s recent performance has certainly helped in keeping these extraordinary volumes moving into export markets – even if it has not yet been widely reflected in livestock price,” a processor said yesterday.       

As mentioned above, last week’s Eastern States kill recorded by the National Livestock Reporting Service reached 158,125, another 125 head above the previous record set back in the week ending May 3.

Again, the expansion was seen in larger southern states tallies, while Queensland remained at capacity, but basically unchanged.

As discussed last week, some of that, at least, is being attributed to some southern meatworks operators pushing north for procurement.

On top of an 11pc rise a week earlier, Victoria lodged another 2pc rise last week to 24,650 head – up 21pc on this time last year. NSW also recorded a 1pc rise to 37,304, while South Australia also lifted 1pc to 8990 head.

Part of the increase can be explained by an earlier rise in Victorian saleyards numbers, but sources also say some Victorian processors are pushing north to source slaughter stock, knowing that they will not encounter strong price competition from NSW or Qld processors already killing at close to capacity.

“Southern processors always get short at this time of year, but unlike previous years, they are probably making a buck in transporting slaughter cattle longer distances this year. Additionally, the processor competition in NSW and Queensland have so many bookings in front of them that they are not overly concerned about it. They’re not treading on each other’s toes,” a processor said last week.

In contrast to southern states, Queensland’s kill last week was unchanged, at 82,443 head, although that was still up 11pc on a year ago. The Queensland result was achieved despite a day’s kill (around 1500 head) being lost last Friday at Teys Beenleigh plant due to industrial action, and the likelihood of that occurring again this Friday.

 

Grids unchanged to slightly higher

Southeast Queensland public grid prices sourced by Beef Central yesterday suggest there has been no change to pricing structures over the past seven days – with the exception, as mentioned above, of one larger processor up 5c.

Quotes included four-tooth grassfed ox 285-290c/kg, milk and two teeth 295-300c, best cow 235-250c/kg. Grassfed MSA steer showed a wide spread from 305c-340c from major processors. 

One possible part of the explanation behind last week’s record Eastern States kill result is the looming Queen’s Birthday public holiday on Monday. The short four-day killing week next week may have prompted some processors to push just that little bit harder last week to maintain production flows.

Another factor could have been the forecast of rain across southern areas, which did eventuate last week, dumping 50-80mm of valuable rain across parts of the Gippsland and southern NSW regions around Wagga and the Riverina.

That rainfall is likely to be reflected in reduced saleyards numbers and killing activity this week, processors say.

In southern cropping/cattle areas, labour may now be diverted for a week or two from the drafting yard onto the tractor seat, to burn some diesel to get a winter crop in, on top of the improved moisture profile.  

  • The Eastern Young Cattle Indicator closed yesterday at 299.75c/kg liveweight, up a further 4.25c on this time a week ago.

 

 

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